Badger Meter, Inc. (BMI) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. Badger Meter, Inc. is a global provider of water management solutions, operating as a single reportable segment. The company focuses on utility water (approx. 89% of sales) and flow instrumentation (approx. 11% of sales), offering hardware, software, and connectivity solutions for water measurement, quality monitoring, and leak detection.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Sales | $202.3 million | $222.2 million |
| Gross Margin | $84.3 million (41.7%) | $95.4 million (42.9%) |
| Operating Earnings | $35.2 million (17.4%) | $49.4 million (22.2%) |
| Net Earnings | $27.3 million | $38.4 million |
| Diluted EPS | $0.93 | $1.30 |
| Cash from Operations | $33.9 million | $33.0 million |
| Cash and Equivalents | $205.5 million | $131.4 million |
| Debt / Credit Facility | $150.0 million line of credit (Unused: $154.6 million) | N/A |
Material Changes vs. Prior Period
- Revenue Decline: Net sales decreased 9.0% year-over-year. Utility water sales dropped 9.6% due to project timing and customer order pacing, partially offset by growth in SaaS and SmartCover revenue. Flow instrumentation sales declined 4.1%.
- Margin Compression: Gross margin percentage fell to 41.7% from 42.9% due to lower sales volume and less favorable product mix.
- Expense Increase: Selling, engineering, and administration (SEA) expenses rose to $49.2 million (24.3% of sales) from $46.0 million (20.7% of sales). This was driven by higher personnel costs, a full quarter of SmartCover expenses, and $1.2 million in acquisition-related costs.
- Working Capital: Inventories increased by $23.3 million to $175.2 million due to timing of receipts. Payables increased by $34.2 million to $106.5 million.
- Share Repurchases: The company repurchased $38.2 million of common stock in Q1 2026, compared to no repurchases in Q1 2025.
Outlook, Risks, and Unusual Items
- Acquisitions:
- SmartCover: Acquired in Jan 2025 for $184.0 million; fully integrated into Q1 2026 results.
- UDlive: Signed agreement on April 13, 2026, to acquire UDlive Ltd for $100 million (plus earn-out). Expected closing April 30, 2026.
- Tariffs: The company is evaluating potential refunds for tariffs invalidated by a Supreme Court ruling in February 2026. Price increases were enacted in 2025 to offset prior tariff costs.
- Dividends: Declared dividend increased to $0.40 per share from $0.34 in the prior year.
- Risks: Key risks include reliance on single suppliers for brass castings and electronic subassemblies, environmental compliance costs, and global trade/tariff volatility.
Investor Verification Checklist
- Verify the impact of the pending UDlive acquisition on future goodwill and amortization expenses.
- Monitor the realization of tariff refunds following the February 2026 Supreme Court ruling.
- Assess the sustainability of inventory levels ($175.2M) relative to the 9.6% decline in utility water sales.
- Review the product mix shift and its long-term effect on gross margins as the company transitions to more SaaS and smart metering solutions.
- Confirm the status of the $114.7 million remaining in the share repurchase program.